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[Ulisses Pereira]

"Shorts May Have Gone Too Far"

By James J. Cramer
RealMoney Columnist
02/05/2004 02:15 PM EST



"Toll (TOL:NYSE - commentary - research) misses, and goes higher. Retailers do fine and roar. The semiconductors and semi-equipment stocks stabilize -- the power of Tom Kurlak? What's going on?


Could it be that the shorts grew too emboldened by yesterday's downturn? Could it be that the shorts pressed their bets as they have too many times?

Makes sense to me. We are too oversold to short, and believe it or not, the record of how the market does after it's been up nine straight weeks, as the S&P was, is remarkably good after the first downdraft. That's where we are now.

What can be bought if you are feeling a little frisky and want to pick at things because you have raised some cash? I think that the "tweener" stocks, things like Viacom (VIAB:NYSE - commentary - research) or Comcast (CMCSA:Nasdaq - commentary - research) make sense, not too cyclical, not too early-cycle. I also think that, at last, the smokestackers can bounce and I don't think you are going to hear anything on the employment front that will derail their show.

I also like the Internets, which have been pounded here, just pounded, yet I think business is quite strong. Yahoo! (YHOO:Nasdaq - commentary - research) and InterActive (IACI:Nasdaq - commentary - research) make the most sense with InterActive reporting next week.

Finally, I would use the downturn to buy some IBM (IBM:NYSE - commentary - research), which is, amazingly, at last selling off.

Does it mean we are out of the woods? No, it does mean that, once again, the shorts pressed too hard, bought too many puts, made too many bets to the negative after a big down day, and the market's just not that terrible.

Not perfect; not terrible.

That's the Toll tell in a nutshell. "

(in www.realmoney.com)